Today, I would like to make a suggestion on a stock that is oversold and getting a bit of a bid today.

The stock is Chubb Ltd. (CB).

It is trading right around the lower band on its daily chart, which is $106.74 and as I write, CB is trading for $105.62.

I am going suggest you trade the June monthly options. And I am going to recommend a debit spread,

Here is the trade.

Buy to Open June 19th - $105.00 call @ $6.50

Sell to Open June 19th - $110.00 call @ $4.40

The net debit will be $2.10 per spread, with a maximum gain of $2.90 per spread.

Based on the nominal portfolio, limit the trade to 5 spreads or about 1% of the portfolio.

While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to a six-month time frame, Mad Day Trader, provided by Bill Davis, will exploit money-making opportunities over a brief ten minute to three-day window. It is ideally suited for day traders, but can also be used by long-term investors to improve market timing for entry and exit points. Read more

DBX is trading about $20 per share as I write this.

And they report earnings on May 7th.  This appears to be reflecting in the option pricing on the stock.

Because of this, I am going to suggest selling calls against DBX.

My suggestion is to sell the calls that expire next Friday.

Here is the suggestion:

Sell to Open (1) May 1st - $20.50 call for every 100 share you own.

You should be able to sell them for $.50.

These are the calls that expire next Friday.

This alert applies to you if you own share in DBX only.  In other words, do not sell naked calls.

Assuming you collect 50 cents per share, it will mean you will have collected $1.25 per share in call premium on DBX.

While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to a six-month time frame, Mad Day Trader, provided by Bill Davis, will exploit money-making opportunities over a brief ten minute to three-day window. It is ideally suited for day traders, but can also be used by long-term investors to improve market timing for entry and exit points. Read more

While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to a six-month time frame, Mad Day Trader, provided by Bill Davis, will exploit money-making opportunities over a brief ten minute to three-day window. It is ideally suited for day traders, but can also be used by long-term investors to improve market timing for entry and exit points. Read more